European Business Law, the fourth volume in our series, shows how the European authorities simultaneously abolish all restrictions on access to and exercise of economic activities and support the growth of domestic markets, through the harmonization the internal legislation or the enactment of genuinely unified regulations.

European Business Law

Pursuant to Article 4(1) of the directive, “the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is …

Assessment of the unfair character by the national court

Pursuant to Article 4(1) of the directive, “the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent”, irrespective of whether, according to the Court of Justice, some of those terms have been declared or presumed to be unfair and annulled at a later time by the national legislature . All the circumstances which could have been known to the seller or supplier at the time of the conclusion of the contract and which were of such a nature that they could affect the future performance of the contract, must therefore be taken into account by the court in its assessment of the existence of any imbalance, as must the expertise and knowledge of the seller or supplier . The supervision by the court not only relates to the substance but also to the form. In effect, according to Article 4(2), “assessment of the unfair nature of the terms shall relate neither to the definition of the main subject-matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplies in exchange, on the other, in so far as these terms are in plain intelligible language” .

It is for the national court to assess the unfairness of the terms submitted to its review. But can it raise of its own motion the unfairness of a term while the consumer himself has not claimed that it was contrary to European law? The Court of Justice has answered yes to that question . The system of protection implemented by the directive relies on the imbalance of powers of the consumer and the seller or supplier . Article 6(1) of the directive thus specifies that the consumer must not be bound by unfair terms. To ensure the fulfillment of that objective, the inequality of the parties to the contract must be offset by a positive action, outside the parties, which may be due to consumer associations (Article 7), but also to the national court. In effect, recognizing that it has the power to find of its own motion the unfairness of a term may have a deterrent effect likely to result in putting an end to the use of the unfair terms in contracts offered by traders. Thus, national legislation can provide for a simplified notarial enforcement procedure without the notary verifying the unfairness of contractual terms, where the national court can carry out that verification in the context of an action challenging the validity of the contract or by the suspension of the enforcement of the contract . However, the national procedural system which does not allow the court, during the order for payment proceedings or the enforcement proceedings concerning an order for payment, to assess of its own motion the potentially unfair nature of the terms of a contract between a seller or supplier and a consumer, undermines the effective protection of the rights provided under the directive . 

Specifying the scope of the power thus recognized to the national court, the Court of Justice has underlined that its exercise cannot be hindered by the establishment of a limitation period since the trader would merely have to wait for the expiry of that period to bring an action, thus depriving the consumer or the court of any possibility to claim the unfair character of the term . A national court hearing an action for annulment of an arbitration award may also determine whether the arbitration clause is unfair even when the consumer raised its nullity merely as part of the action for annulment against the award . The Court of Justice goes even further when it asserts that the national court is “required to assess of its own motion whether a contractual term is unfair” where it has available to it the legal and factual elements necessary for that task, including when it is assessing whether it has territorial jurisdiction  or where, under its national rules of procedure, it must carry out such an assessment in similar actions of a domestic nature .  When hearing an action brought by a consumer seeking a declaration that certain terms in a contract that it entered into with a professional are unfair, a national court is not required to examine of its own motion and individually all the other contractual terms, which were not challenged by that consumer but must examine only those terms which are connected to the subject matter of the dispute, as delimited by the parties, where it has available to it the legal and factual elements necessary for that task, as supplemented, where necessary, by measures of inquiry . Furthermore, where the unfair nature of a term has been acknowledged, the national court is required, of its own motion, and also as regards the future, to draw all the consequences provided for by national law  in order to ensure that consumers who have concluded a contract to which the same term applies will not be bound by that term . Therefore it can, where it has the power under internal procedural rules, annul of its own motion a contractual term which it has found to be unfair  and is not obliged, in order to be able to draw the consequences arising from that finding, to wait for the consumer, who has been informed of his rights, to submit a statement requesting that that term be declared invalid, even though the principle of audi alteram partem requires the national court to inform the parties and to give them the opportunity to challenge the views of the other party, in accordance with the formal requirements laid down in that regard by the national rules of procedure . On the other hand, the national court is not authorized to revise the content of unfair contractual terms insofar as that contract must continue in existence, in principle, without any amendment other than that resulting from the deletion of the unfair terms  or to interpret the disputed term in order to remedy its unfairness, even if that interpretation would correspond to the common intention of the  parties . Where a contract cannot continue in existence after an unfair term has been deleted, that provision does not preclude a rule of national law enabling the national court to cure the invalidity of that term by substituting for it a supplementary provision of national law . Therefore, where a mortgage loan contract between a seller or supplier and a consumer is not capable of continuing in existence following the removal of an unfair term, whose wording is based on a provision of legislation which is applicable where the parties to the contract so agree, the national court can replace that term, with a view to preventing that contract from becoming invalid, with the new wording of that reference provision, introduced after the conclusion of the contract, insofar as the annulment of the contract would expose the consumer to particularly unfavorable consequences . On the other hand, EU law precludes an accelerated repayment clause of a mortgage loan contract that has been found to be unfair from being maintained in part, with the elements which make it unfair removed, where the removal of those elements would be tantamount to revising the content of that clause by altering its substance . Unfair terms contained in a contract cannot be upheld where their removal would entail that contract being annulled and the court takes the view that that annulment would give rise to unfavorable effects for the consumer if the latter has not consented to them being upheld. In regard thereto, the Court of Justice considers that the consequences for the consumer of a contract being annulled in its entirety must be assessed in the light of the existing or foreseeable circumstances at the time when the dispute arose, and that for the purposes of that assessment, the wishes expressed by the consumer in that regard are the decisive factor . EU Law precludes national legislation which prevents the court seized of the case from granting an application for the cancellation of a loan contract on the basis of the unfair nature of a term relating to the exchange difference, where it is found that that term is unfair and that the contract cannot continue to exist without that term. However, such legislation is compatible with the directive provided that a finding that terms in such an agreement were unfair would restore the legal and factual situation that the consumer would have been in had that unfair term not existed . However, when a loan agreement cannot continue to exist in law after the unfair terms have been removed, the national court must take all the measures necessary to protect the consumer from the  particularly unfavorable consequences which could result from the  annulment of the loan agreement in question, notably the fact that the  seller or supplier could immediately claim the debt from the consumer . Lastly, the continuity of the agreement is  legally impossible after the term defining the main subject matter of the agreement has been held to be unfair .  

Case C-51/17 OTP Bank Nyrt., Judgment of 20 September 2018, LawLex201800001347JBJ.

Case C-186/16 Andriciuc and others, Judgment of 20 September 2017, LawLex201700001472JBJ.

  Case C-40/08 Asturcom Telecomunicaciones [2009] ECR I-9579, LawLex201100000321JBJ; Case C-397/11 Erika Jorös, Judgment of 30 May 2013, LawLex201300000880JBJ.

Case C-511/17 Lintner, Judgment of 11 March2020, LawLex202000000356JBJ.

Case C-472/10 Nemzeti Fogyasztóvédelmi Hatóság, Judgment of 26 April 2012, LawLex201200001761JBJ.

Case C-488/11 Asbeek Brusse, Judgment of 30 May 2013, LawLex201300000881JBJ.

Case C-472/11 Banif Plus Bank, Judgment of 21 February 2013, LawLex201300000192JBJ.

Case C-618/10 Banco Español de Crédito SA  v Camino, Judgment of 14 June 2012,  LawLex201200001486JBJ.

Case C-212/20 M.P., B.P. Judgment of 18 November 2021, LawLex202200002741JBJ.

Case C-26/13 Árpád Kásler, Judgment of 30 April 2014, LawLex201400000641JBJ.

Case C-932/19 JZ Judgment of 2 September 2021, LawLex202100005429JBJ: on the requirement for the national court with jurisdiction to replace the unfair term  relating to the exchange difference with a provision of national law imposing the use of an official exchange rate, without providing for the possibility for that court to grant the  application of the consumer concerned for the annulment of the loan agreement in its entirety.

Cases C-70/17 and C-179/17 Abanca Corporación Bancaria SA, Bankia SA, Judgment of 26 March 2019, LawLex201900000419JBJ.

Case C-472/11 Banif Plus Bank Zrt, Judgment of 21 February 2013, LawLex201300000192JBJ: the national court must, in order to determine whether the contractual term on which the claim brought before it is based may be unfair, take account of all of the other terms of the contract; Case C-92/11 RWE Vertrieb AG, Judgment of 21 May 2013, LawLex201300000471JBJ: it is for the national court to carry out that assessment with regard to all the circumstances of the particular case, including all the general terms and conditions of the consumer contracts i.e. whether the contract sets out in transparent fashion the reason for and method of the variation of those charges, so that the consumer can foresee, on the basis of clear, intelligible criteria, the alterations that may be made to those charges as the lack of information on the point before the contract is concluded cannot, in principle, be compensated for by the mere fact that consumers will, during the performance of the contract, be informed in good time of a variation of the charges and of their right to terminate the contract if they do not wish to accept the variation.

Case C-260/18 Dziubak Judgment of 3 October 2019, LawLex202000001652JBJ.

 Case C-118/17 Dunai v Erste Bank, Judgment of 14 March 2019, LawLex202000001653JBJ. 

Case C-269/19 Banca B. SA, Judgment of 25 November 2020, LawLex202100004711JBJ. 

Case C-38/17 GT v HS, Judgment of 5 June 2019, LawLex201900000752JBJ. 

Case C-240/98 Océano Grupo Editorial and Salvat Editores [2000] ECR I-4941, LawLex200700001615JBJ.

According to the Court, Article 6(1) is a mandatory provision which aims to replace the formal balance which the contract establishes between the rights and obligations of the parties with an effective balance which re-establishes equality between them: Case  C-397/11 Erika Jorös, Judgment of 30 May 2013, LawLex201300000880JBJ.

Case C-32/14 Bank Hungary Zrt. v Sugár, Judgment of 1 October 2015, LawLex201500001180JBJ.

Case C-49/14 Finanmadrid EFC (SA) v Albán Zambrano, Judgment of 18 February 2016, LawLex201600000351JBJ.

Case C-473/00 Cofidis [2002] ECR I-10875, LawLex200900000951JBJ.

Case C-168/05 Mostaza Claro [2006] ECR I-10421, LawLex200900000684JBJ.

Case C-243/08 Pannon GSM [2009] ECR I-4713, LawLex200900002359JBJ.

European Business Law

221. Assessment of the unfair character by the national court

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221. Assessment of the unfair character by the national court

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise